Written by 5:43 am Employer Support

Income Tax Slabs for FY 2023-24

Income Tax Slabs

Table of Contents

In India, income taxation is subject to annual revisions by the finance ministry. In the most recent Union Budget 2023, unveiled on February 1st, Finance Minister Nirmala Sitharaman introduced notable changes to the existing income tax slabs. Presently, taxpayers have the option to choose between two distinct tax regimes, both of which offer various benefits. This article takes a closer look into the latest alterations in the income tax structure, shedding light on the implications for taxpayers in the country. We will start by covering the basics and then gradually progress to the impact of the change on the country.

What is Income Tax?

While all of us have a basic understanding of the concept of ‘income tax’. Let’s dive into the legal side of things. The term “Income,” as defined in Section 2(24) of the Income Tax Act, is encompassing and broadly inclusive. It covers various sources, and we will break down its understanding without delving too deeply.

Income for Salaried Individuals
For salaried individuals, income constitutes any amount received from their employer, whether in cash, kind, or as facilities. This includes the entirety of their compensation package, such as basic pay, dearness allowance, medical and transport allowances, annuity, gratuity, and other allowances and commissions. The total of these incomes, after exemptions but before deductions, is referred to as gross salary.

Income for Businesspersons
Businesspersons, on the other hand, earn income through the profits and gains generated by their businesses. The taxable income is the net amount after deducting various business-related expenses. This ensures a fair assessment of the actual income derived from business operations.

Income for Professionals, Freelancers, etc
Professionals, freelancers, and individuals with various income sources experience their earnings as income. This could include professional fees, income from diverse sources, and any other form of compensation received for services rendered.

Rental Income and Capital Gains
Another aspect of income involves rental income from owned properties and capital gains resulting from the sale of assets like shares or property. These gains are classified into short-term and long-term, and understanding the implications is crucial for tax planning.

Income from Investments
Income from investments covers various sources, including interest, dividends, commission, and other earnings generated from invested capital. These diverse forms of income contribute to the overall financial picture.

Income Tax Department’s Classification

The Income Tax Department classifies income into five broad categories, each with its own specific characteristics and tax implications:

  • Income from Salary
    • Monthly earnings, including allowances and perks.
    • Exemptions and allowances apply in an employer-employee relationship.
  • Income from House Property
    • Rental income from owned properties, including residential and commercial.
    • Home loan interest is considered negative income.
  • Income from Business or Profession
    • Taxable under “Profits and Gains of Business or Profession.”
    • Tax is applied to the net income after deducting relevant expenses.
  • Income from Capital Gains
    • Profits from the transfer of capital assets.
    • Can be short-term or long-term gains.
  • Income from Other Sources
    • Encompasses income not covered by the preceding categories.
    • Examples include savings bank interest, lottery winnings, and reality show prizes.

Understanding these distinct income categories is essential for effective tax management, allowing individuals to navigate the complex landscape of taxation with clarity and precision.

What is an Income Tax Slab?

Income Tax Slab can be defined as the categorisation of individual taxpayers based on their income levels. It is quite literal in what it means: it determines the amount of income tax the citizens are required to pay.

Taxpayers are placed into specific slabs according to their earnings, and each slab has an associated tax rate. Individuals with higher incomes are placed in higher tax slabs, necessitating a higher tax payment. This system was implemented to establish an equitable taxation structure within the country. It’s important to note that these slabs are subject to change with every budget announcement, reflecting the government’s evolving fiscal policies and economic considerations.

What is the Income Tax Slab for the New Tax Regime FY 2023-24?

Under the new tax regime announced by the finance minister, significant changes have been introduced in the income tax structure for individuals. One notable adjustment is the increase in the tax exemption limit, raised to Rs.7 lakh from the previous limit of Rs.5 lakh. Additionally, alterations have been made to the tax slabs in this new regime. The revised income tax slab rates for individuals are as follows:

Income Tax Slab Income Tax Rate
Up to Rs.3 lakh Nil
Rs.3 lakh – Rs.6 lakh 5%
Rs.6 lakh – Rs.9 lakh 10%
Rs.9 lakh – Rs.12 lakh 15%
Rs.12 lakh – Rs.15 lakh 20%
Above Rs.15 lakh 30%

These changes underscore the importance of informed decision-making for taxpayers, who now have the flexibility to choose the tax regime that best suits their financial circumstances.

Things To Consider for the New Regime

  1. Universally Consistent Tax Rate: In the updated tax regime, consistent tax rates apply universally, encompassing Hindu Undivided Families and individuals across age categories: up to 60 years, senior citizens (60 to 80 years), and super senior citizens (80 years and above). Notably, there is no adjustment to the basic exemption limit, maintaining parity for senior and super-senior citizens under the new tax framework.
  2. Flexibility in Exercising the Option: You can opt for the new regime at the beginning of each financial year if you do not have any business income as an individual or a member of a Hindu Undivided Family (HUF).
  3. Choice: Individuals with salaried income have the flexibility to switch between the new and old tax regimes every year. However, this option is exclusively available to those individuals who derive income from salaries and do not have any business income. From the fiscal year 2023-24 onward, the new tax regime is set as the default choice for all taxpayers. Those preferring the older tax regime must explicitly specify this preference during filing.

Comparing New Income Tax Slabs: FY 2023-24 vs FY 2022-23

In the financial year 2023-24, the Indian income tax structure has seen significant changes that obviously impact every single taxpayer. Here’s a detailed comparison between the income tax slabs for FY 2022-23 and FY 2023-24 under the new tax regime:

Income Tax Rates  FY 2022-23 FY 2023-24
NIL Rs.0 – Rs.2.5 lakh Rs.0 – Rs.3 lakh
5% Rs.2.5 lakh – Rs.5 lakh Rs.3 lakh – Rs.6 lakh
10% Rs.5 lakh – Rs.7.5 lakh Rs.6 lakh – Rs.9 lakh
15% Rs.7.5 lakh – Rs.10 lakh Rs.9 lakh – Rs.12 lakh
20% Rs.10 lakh – Rs.12.5 lakh Rs.12 lakh – Rs.15 lakh
25% Rs.12.5 lakh – Rs.15 lakh
30% Above Rs. 15 lakhs Above Rs. 15 lakh

Important Changes

  1. Tax Exemption Limit: Under the new tax regime for FY 2023-24, the tax exemption limit has been raised to Rs.7 lakh from the previous limit of Rs.5 lakh. Taxpayers with a net taxable income up to ₹7 lakh qualify for a tax rebate under section 87A within the new tax regime. Conversely, individuals opting for the traditional tax structure will find the rebate limit fixed at ₹5 lakh.
  2. Deductions and Exemptions: Several deductions and exemptions available in the old tax regime do not apply in the new tax regime. Approximately 70 deductions and exemptions, including housing loan interest, professional tax, and certain allowances, are not applicable in the new regime.

Different Sources of Income: Taxable and Non-Taxable

Exempt Incomes, as per the Income Tax Act, are not subject to taxation and are excluded from the total income calculation. Examples of such income include interest earned from PPF. On the other hand, Taxable Incomes are subject to taxation, encompassing sources like salary, house property, and capital gains, among others.

Non–Taxable Income

Gifts/Inheritances
Non-taxable income includes earnings or gifts received from relatives, which are generally exempt from taxation. However, there are exceptions when the relative is a foreign resident. Gifts from non-relatives enjoy exemption only if their value is less than Rs 50,000. Notably, gifts received on the occasion of the taxpayer’s wedding are also exempt from taxation, regardless of the giver’s relation.

Maturity Amount/ Survival Amount of Life Insurance
Returns received upon the maturity of life insurance policies, including the death benefit, are considered non-taxable income. The specific tax treatment may vary based on the insurance amount involved. This exemption provides relief to individuals benefiting from life insurance policies in various financial scenarios.

Agricultural Income
Under section 10(1) of the Income Tax Act, income derived from agriculture and farming activities is classified as non-taxable. This exemption extends to income generated from poultry and cattle rearing. The provision aims to support individuals engaged in agricultural pursuits by alleviating their tax burden on these specific income streams.

Gratuity
Gratuity, an amount received by employees as a token of appreciation for their dedicated and long-standing service to a company, is considered non-taxable income. Notably, government employees enjoy complete tax exemption on gratuity amounts. For non-government employees covered under the Gratuity Act of 1972, tax exemption applies if the gratuity amount is less than Rs 10 lakh. This exemption is subject to the condition that the employee has completed five years of continuous service with a single organisation. The provision encourages loyalty and service commitment among employees.

Interest on Specific Income
Additionally, interest earned on specific schemes such as the Sukanya Samriddhi Scheme, gold deposit bonds, and tax-free infrastructure bonds is exempt from tax liabilities. These schemes provide a financial avenue where the interest generated remains non-taxable, offering individuals an opportunity to grow their savings without the burden of additional taxation.

Knowing the distinction between taxable and non-taxable income is crucial to accurate income tax filing. Failing to discern between the two categories can lead to errors, potentially resulting in penalties or legal consequences due to non-compliance with tax laws. Therefore, thoroughly comprehending the tax implications of various income sources is essential for a seamless and compliant tax filing process.

Deductions and Exemptions Under the New Income Tax Slabs

Under the new tax regime, several deductions and exemptions that were available in the old tax system no longer apply. Approximately 70 deductions and exemptions have been excluded in the new tax regime, streamlining the tax process. Here’s a breakdown of what is allowed and what is not:

Deductions that are Allowed
Travelling Allowance Applicable in cases of transfer or employment-related travel.
Additional Depreciation Along with other deductions under Section 32.
Deduction under Section 80JJAA Available for new employees in the form of employment benefits.
Investments in Notified Pension Scheme Under section 80CCD(2), a deduction is applicable concerning the Employer’s Contribution to the National Pension Scheme (NPS). This deduction is calculated at 10% of the basic salary and dearness allowance for private sector employees and 14% for government employees.
Conveyance Allowance Provided for work-related travel.
Transport Allowance for Specially Abled Individuals Special provisions for transport allowance.
Standard Deduction on Salary Salaried individuals and pensioners can claim a standard deduction of Rs. 50,000 under section 16(ia).
Contribution to Agniveer Corpus Fund Deduction for contribution to Agniveer Corpus Fund under section 80CCH(2).
Deductions that are Not Allowed
Housing Loan Interest No deductions under Section 24 for housing loan interest.
Professional Tax Professional tax payments are not eligible for deductions.
Special Allowances Special allowances under Section 10(14) are not considered for deductions.
Children’s Education Allowance Deductions for children’s education expenses are not permitted.
Helper Allowance Allowances for helpers are not eligible for deductions.
Relocation Allowance Relocation allowances are not considered for tax deductions.
Conveyance Allowance General conveyance allowances are excluded from deductions.
House Rent Allowance (HRA) HRA is not applicable for deductions in the new tax regime.
Leave Travel Allowance (LTA) Leave travel allowances are not considered for tax deductions.

These changes reflect the simplified approach of the new tax regime, providing clarity regarding eligible deductions and exemptions for taxpayers.

How to Calculate Income Tax

Income from salary comprises various components such as Basic Salary, House Rent Allowance (HRA), Special Allowance, Transport Allowance, and other allowances. Some elements of your salary, like telephone bill reimbursements and leave travel allowances, are exempt from tax. Additionally, if you receive HRA and reside on rent, you can claim exemptions on HRA, calculated using an HRA Calculator.

Apart from these exemptions, there’s a standard deduction introduced in the budget. Initially set at Rs. 40,000 in 2018, it increased to Rs. 50,000 in 2019. Under the new Budget 2023, a standard deduction of Rs. 50,000 is applicable in the new tax regime as well. It’s important to note that if you choose the new tax regime, these exemptions won’t be available to you.

Tax Calculation Example

Let’s break down the income tax calculation through an example using both the current and new tax slabs. Consider Neha, who receives a Basic Salary of Rs. 1,00,000 per month, an HRA of Rs. 50,000, a Special Allowance of Rs. 21,000 per month, and an annual LTA of Rs. 20,000. Neha pays a monthly rent of Rs. 40,000 and lives in Delhi.

In the table below, we’ve outlined Neha’s various income components, exemptions, and deductions. This clear breakdown helps in understanding the taxable portions of income under both the current and new tax regimes. Remember, it’s crucial to consider these details while planning your taxes to make informed financial decisions.

Nature Amount Exemption/ Deduction Taxable (Old regime) Taxable (New regime)
Basic Salary 12,00,000 12,00,000 12,00,000
HRA 6,00,000 3,60,000 2,40,000 6,00,000
Special Allowance 2,52,000 2,52,000 2,52,000
LTA 20,000 12,000 (bills submitted) 8,000 20,000
Standard Deduction 50,000 50,000 50,000
Gross Total Income from Salary 16,50,000 20,22,000

When computing your income tax, it’s important to take into account all your sources of income and deductions that you qualify for. This includes:

  • Income from Salary: This includes the salary paid by your employer.
  • Income from House Property: This encompasses rental income or interest paid on home loans.
  • Income from Capital Gains: Any income generated from the sale or purchase of shares or houses.
  • Income from Business/Profession: This involves income from freelancing, business, or professional activities.
  • Income from Other Sources: This includes interest income from savings accounts, fixed deposits, or bonds.

Let’s consider Neha’s case as an example. Neha has an interest income of Rs. 8,000 from a savings account and a fixed deposit interest income of Rs. 12,000 during the year. Additionally, Neha has made specific investments to save on income tax, which falls under various sections.

Nature Maximum Deduction Eligible Investments/ Expenses Eligible Amount to be Claimed by Neha
Section 80C Rs. 1,50,000 PPF deposit Rs. 50,000, ELSS investment Rs. 20,000, LIC premium Rs. 8,000, EPF deducted by the employer (Neha’s contribution) = Rs. 12,00,000 *12% = Rs. 1,44,000 Rs. 1,50,000
Section 80D Rs. 25,000 for self, Rs. 50,000 for parents Medical insurance premium Rs. 12,000 Rs. 12,000
Section 80TTA Rs. 10,000 Savings account interest Rs. 8,000 Rs. 8,000

In this table, Neha’s eligible investments and expenses under various sections have been clearly outlined, ensuring a comprehensive understanding of the deductions claimed under the old tax regime. This clarity aids Neha in optimising her tax-saving strategy while staying compliant with the tax laws.

To understand the income tax calculations for Neha under both the old and new tax regimes, it’s essential to examine her various sources of income and the applicable deductions. Let’s break down Neha’s gross taxable income and the corresponding tax calculations under both regimes.

Old Regime

Nature Amount
Income from Salary Rs. 16,50,000
Income from Other Sources Rs. 20,000
Gross Total Income Rs. 16,70,000
Deductions
Section 80C Rs. 1,50,000
Section 80D Rs. 12,000
Section 80TTA Rs. 8,000
Gross Taxable Income Rs. 15,00,000
Total Tax (including cess) Rs. 2,73,000

New Regime

Nature Amount
Income from Salary Rs. 20,22,000
Income from Other Sources Rs. 20,000
Gross Total Income Rs. 20,42,000
Total Tax (including cess) Rs. 3,25,104
Tax Calculation Breakdown
Up to Rs. 3,00,000 Exempt from tax
Rs. 3,00,000 to Rs. 6,00,000 5% of (Rs. 6,00,000 – Rs. 3,00,000)
Rs. 6,00,000 to Rs. 9,00,000 10% of (Rs. 9,00,000 – Rs. 6,00,000)
Rs. 9,00,000 to Rs. 12,00,000 15% of (Rs. 12,00,000 – Rs. 9,00,000)
Rs. 12,00,000 to Rs. 15,00,000 20% of (Rs. 15,00,000 – Rs. 12,00,000)
Above Rs. 15,00,000 30% of (Rs. 20,42,000 – Rs. 15,00,000)
Cess (4% of total tax) Rs. 12,504
Total Income Tax Rs. 3,25,104

Explanation of Taxable Income Calculation

Learning how to calculate your taxable income, especially regarding your monthly salary, can initially seem complex. However, breaking down the process step by step can demystify the intricacies. Since any earned income is generally taxable unless explicitly mentioned otherwise, grasping the fundamentals becomes essential. Let’s delve into the comprehensive process of calculating taxable income based on your salary.

Step 1: Understand Your Salary Structure
Begin by comprehending your salary structure, which varies across employers. Key components fall into three categories: fully taxable, partially taxable, and fully exempt. Basic salary, bonus, and certain allowances like dearness, overtime, city compensatory, tiffin, cash, project, helper, and uniform are fully taxable. Examples of partially taxable allowances include House Rent Allowance (HRA), Leave Travel Allowance (LTA), conveyance, medical, education, hostel, and special allowances. Some allowances, like those for supreme court and high court judges or benefits for working with the UNO, are non-taxable.

Reimbursements for business expenses against proof or bill submission are also non-taxable as they don’t add to the employee’s income.

Step 2: Calculate Gross Salary
Aggregate different salary components to arrive at your gross salary by adding all allowances to your basic pay.

Step 3: Deduct Non-Taxable Portions
Deduct the non-taxable portion of partially taxable allowances, such as HRA and LTA. Use the prescribed formula for HRA exemption provided by the Income Tax Department.

Step 4: Deduct Professional Tax and Standard Deduction
Deduct professional tax and standard deduction from your salary. Salaried individuals are entitled to a standard deduction of ₹52,500.

Step 5: Include Other Income Streams
If you have additional income streams beyond your salary, such as interest, fees, commission, rental income, or capital gains, add them to your total income.

Step 6: Arrive at Gross Total Income
Calculate your gross total income, which is the sum of all your income sources.

Step 7: Calculate Net Taxable Income
Deduct tax deductions from your gross taxable income to arrive at your net taxable income.

Step 8: Consider Various Deductions
Consider deductions available under Chapter VI A of the Income Tax Act. For example, section 80C allows deductions against investments and expenses, including LIC premium, PPF and EPF contribution, NPS investment, ELSS investment, and more. Other deductions cover medical expenses, disabled dependents, specific diseases, higher education-related expenses, and interest on home loans.

Step 9: Determine Taxable Income
After applying deductions, you will arrive at your taxable income, which is then subjected to the income tax rate as per the applicable tax slab for the assessment year.

Step 10: Choose the Right Tax Regime
Be aware that deductions and tax rates vary depending on the chosen tax regime—existing or new. Seek advice from a financial advisor to optimise tax-saving opportunities and make informed decisions.

Understanding these steps and nuances is crucial for effective tax planning and compliance.

Old Income Tax Slabs for Salaried Individuals

Income Range Tax Rate
Up to Rs.2.5 lakh Nil
Rs.2,50,001 – Rs.5 lakh 5%
Rs.5,00,001 – Rs.10 lakh 20%
Above Rs.10 lakh 30%

Individuals earning less than Rs.5 lakh are eligible for tax deductions under Section 87A.

Example of Income Tax Calculation under Old Regime (for Individuals A, B, and C):

Components A (Rs.) B (Rs.) C (Rs.)
Annual Salary 5,00,000 10,00,000 15,00,000
House Rent Allowance deductions 82,000 90,000 1,40,000
Standard Deduction 50,000 50,000 50,000
Tax deductions under Section 80C 70,000 1,50,000 1,50,000
Gross taxable income after deductions 2,98,000 7,10,000 11,60,000
Tax Calculation
Up to Rs.2.5 lakh (Nil Tax) Nil Nil Nil
Rs.2,50,001 – Rs.5 lakh (5%) 2,400 12,500 12,500
Rs.5,00,001 – Rs.10 lakh Nil 42,000 1,00,000
Above Rs.10 lakh Nil Nil 48,000
Total Tax (before deductions under Section 87A) 2,400 54,500 1,60,500
Deductions under Section 87A 2,400 Nil Nil
Additions of Cess (4%) Nil 2,180 6,420
Total Payable Tax (Total Tax + Cess – Deductions under Section 87A) Nil 56,680 1,66,920

Note: Tax calculations are based on the specified income, deductions, and applicable tax rates for each individual (A, B, and C).

New Income Tax Slabs for Senior Citizens (Above 60 Years)

Senior citizens can earn income through various avenues, such as pensions, savings interest, rental income, fixed deposits, and reverse mortgages. However, these incomes are subject to taxation under the Income Tax Act.

Income Tax Slabs for Senior Citizens (FY 2023–24)

Income Range (Rs.) Tax Rate
Up to 2,50,000 None
2,50,001 to 5,00,000 5%
5,00,001 to 7,50,000 10%
7,50,001 to 10,00,000 15%
10,00,001 to 12,50,000 20%
12,50,001 to 15,00,000 25%
Above 15,00,000 30%

Example of How Tax is Calculated for 3 Individuals: 

In this example, individuals A, B, and C have different annual salaries and deductions, leading to varied tax liabilities. The table breaks down their incomes, deductions, and the corresponding tax calculations, including applicable cess and deductions under Section 87A, for the Assessment Year 2023-24.

Components A (Rs.) B (Rs.) C (Rs.)
Annual Salary (Rs.) 5,00,000 10,00,000 15,00,000
House Rent Allowance Deductions (Rs.) 82,000 90,000 1,40,000
Standard Deduction (Rs.) 50,000 50,000 50,000
Tax Deductions under Section 80C (Rs.) 70,000 1,50,000 1,50,000
Gross Total Income after Deductions (Rs.) 2,98,000 7,10,000 11,60,000
Tax Calculation
Up to Rs.3 lakh (Nil Tax) Nil Nil Nil
Rs.3,00,001 – Rs.5 lakh (5%) Nil 10,500 10,500
Rs.5,00,001 – Rs.10 lakh (20%) Nil 40,000 99,500
Above Rs.10 lakh (30%) Nil Nil 45,000
Total Tax (before deductions under Section 87A) Nil 50,500 1,55,000
Deductions under Section 87A (Rs.) Nil Nil Nil
Additions of Cess (Rs.) Nil 2,020 6,200
Total Tax Payable (Rs.) Nil 52,520 1,61,200

Benefits for Senior Citizens Under New Regime 

Senior citizens, aged above 60 years, can avail of various benefits under the Income Tax Act:

  • Deductions under Section 80C: Senior citizens can claim deductions for specified investments and expenses.
  • Reverse Mortgage Scheme Benefits: Senior citizens can benefit from the Reverse Mortgage Scheme, which provides financial assistance.
  • Exemptions on Advance Tax Payment: Senior citizens are entitled to exemptions in the case of advance tax payments.
  • Higher Bank Interest Rates: Banks offer higher interest rates on savings and fixed deposits for senior citizens.
  • Higher Deductions for Medical Treatments: Senior citizens enjoy increased deductions for certain medical treatments.
  • Enhanced Medical Insurance Deductions: Senior citizens can avail higher deductions on medical insurance premiums.
  • Tax Deductions under Section 87A: Senior citizens can claim tax deductions under Section 87A for specified income levels.
  • Standard Deductions: Standard deductions are available to reduce the taxable income for senior citizens.
  • Higher Income Exemption Limit: Senior citizens benefit from a higher income exemption limit, ensuring a reduced tax burden.

Tax Calculation for Senior Citizens

Senior citizens can calculate their taxable income by considering the income generated from all sources. Various exemptions and deductions are allowed under different sections of the Income Tax Act. Here is a summary of the deductions available to senior citizens under the old income tax slabs:

  • Section 80C: Deduction of up to Rs. 1.5 lakh can be claimed under investments such as:
    • National Savings Certificate
    • Senior Citizen Savings Scheme
    • Life Insurance Premium
    • Public Provident Fund
    • Equity Linked Savings Scheme
    • 5-year Fixed Deposit
  • Section 80CCC: An additional deduction of Rs. 50,000 can be claimed under Section 80CCD(1B), with an extra deduction available under Section 80CCD(2).
  • Section 80D: Deduction of up to Rs. 50,000 can be claimed for medical insurance premiums.
  • Section 80DD: Depending on the disability, a deduction of up to Rs. 1.25 lakh can be claimed.
  • Section 80DDB: Deduction of up to Rs. 1 lakh can be claimed for specified medical treatments.
  • Section 80G: The deduction amount varies based on charitable donations made.
  • Section 80GGC: Deductions allowed for contributions made towards an electoral trust or political party.
  • Section 80RRB: Deduction of up to Rs. 3 lakh can be claimed for income earned from patents.
  • Section 80TTB: Deduction of up to Rs. 50,000 on interest income earned from savings accounts and fixed deposits with banks.
  • Section 80U: Depending on the severity of the disability, a deduction of up to Rs. 1.25 lakh can be claimed.

Tax Exemptions for Senior Citizens 

A senior citizen, defined as an individual resident aged 60 years or more but below 80 years as of the last day of the previous year, enjoys specific tax exemptions on various income sources, including pension, rental income, interest on savings, fixed deposits, senior citizen saving scheme, reverse mortgage, and post office schemes.

Health Insurance Deductions (Section 80D)
Deduction Type Maximum Amount Eligibility
Health Insurance Premium Up to Rs.50,000 per annum Senior citizens can claim deductions towards health insurance premiums and/or medical expenses.
Critical Illness (Section 80DDB) Up to Rs.1 lakh per annum Senior citizens can claim deductions for specified critical illnesses in the case of dependent seniors.
Pension Deduction (Section 80D)
Pension (Annuity Payments) Rs.50,000 per year A standard deduction of Rs.50,000 per year is allowed for pensions received in the form of annuity payments, similar to salaried income.
Interest Income from Deposits (Section 80TTB)
Interest Income from Deposits Up to Rs.50,000 per annum Senior citizens can avail of a maximum deduction of Rs.50,000 per annum under Section 80TTB.

Additionally, senior citizens benefit from a Central Board of Direct Taxes directive stating that their cases cannot be scrutinised unless there is a need for assessment based on credible information. This directive offers them a level of assurance and peace of mind regarding their tax affairs.

Income Tax Filing for Senior Citizens

Senior citizens are required to file their income tax returns to claim tax refunds. Depending on their sources of income, they need to use specific Income Tax Return (ITR) forms. Here are the applicable ITR forms for senior citizens:

ITR 1: Senior citizens whose total income includes:

  • Salary or pension
  • Income from house or property (excluding losses carried forward from previous financial years)
  • Income from other sources (excluding income from horse racing or winning lottery)

ITR 2: Senior citizens whose total income includes:

  • Salary or pension
  • Income from house or property
  • Capital gains
  • Income from other sources (including winnings from horse racing and lottery)
  • Cases where the income of another individual, such as a spouse or other family member, needs to be combined with the individual’s income

Income Tax Slabs for Super Seniors above 80 years  (FY 2023–24)

Super senior citizens are people who are above 80 years of age. There is no tax on income up to Rs.5 lakh. For income above Rs.5 lakh and up to Rs.10 lakh, a 20% tax is applicable on the amount exceeding Rs.5 lakh, along with a 4% cess. For income above Rs.10 lakh, a 30% tax is applied on the amount exceeding Rs.10 lakh, plus Rs. 1,00,000 and a 4% cess.

Income Range Tax Rate
Up to Rs.5 lakh Nil
Above Rs.5 lakh – Rs.10 lakh 20% of income exceeding Rs.5 lakh + 4% cess
Above Rs.10 lakh 30% of income exceeding Rs.10 lakh + Rs.1,00,000 + 4% cess

Income Tax Calculation for Individuals A, B, and C:

In this example, individuals A, B, and C have varying annual salaries, deductions, and taxable incomes, resulting in different tax liabilities. The table breaks down their incomes, deductions, and the corresponding tax calculations, including applicable cess and deductions under Section 87A.

Components A (Rs.) B (Rs.) C (Rs.)
Annual Salary (Rs.) 5,00,000 10,00,000 15,00,000
House Rent Allowance Deductions (Rs.) 82,000 90,000 1,40,000
Standard Deduction (Rs.) 50,000 50,000 50,000
Tax Deductions under Section 80C (Rs.) 70,000 1,50,000 1,50,000
Gross Total Income after Deductions (Rs.) 2,98,000 7,10,000 11,60,000
Tax Calculation
Up to Rs.5 lakh (Nil Tax) Nil Nil Nil
Rs.5,00,001 – Rs.10 lakh (20%) Nil 40,000 1,00,000
Above Rs.10 lakh (30%) Nil Nil 45,000
Total Tax (before deductions under Section 87A) (Rs.) Nil 40,000 1,45,000
Deductions under Section 87A (Rs.) Nil Nil Nil
Additions of Cess (Rs.) Nil 1,600 5,800
Total Tax Payable (Rs.) Nil 41,600 1,50,800

Income Tax Slabs for Domestic Companies Based on Turnover

Domestic companies are taxed at 25% if their gross turnover does not exceed Rs.250 crore in the previous year. If the turnover is more than Rs.250 crore, the tax rate is 30%.

Type of Company Old Regime Tax Rates New Regime Tax Rates
Company under Section 115BAB (Registered on or after 1 Oct 2019, commenced manufacturing by 31 Mar 2023) 15%
Company under Section 115BAA (No specified deductions, incentives, exemptions, or additional depreciation claimed) 22%
Company under Section 115BA (Registered on or after 1 Mar 2016, engaged in manufacturing, no specified deductions claimed) 25%
Company with turnover less than Rs. 400 crore in the previous year 2018-19 25% 25%
Any other domestic company 30% 30%

Additional Taxation Details: Cess and Surcharge

  • Cess: An additional 4% cess is charged on the corporate tax amount.
  • Surcharge: If taxable income is between Rs.1 crore and Rs.10 crore, a surcharge of 7% is applied. For taxable income exceeding Rs.10 crore, the surcharge increases to 12%.
  • Non-Resident Indians (NRIs): Regardless of their age, NRIs have an exemption limit of up to Rs.2.5 lakh.
Important Points to Note

  • If your net income falls between Rs.50 lakh and Rs.1 crore, a 4% cess and a 10% surcharge are levied.
  • For incomes exceeding Rs.1 crore, a 4% cess and a higher surcharge of 15% are applied.
  • Notably, the cess has increased from 3% to 4% compared to last year’s budget.

Income Tax Slabs for NRIs

To determine whether an individual qualifies as a Non-Resudentt for tax purposes in India, their residential status is crucial, defined under Section 6 of the Income Tac Act, 1961. The conditions for an individual to be considered a Resident in India for any previous year are as follows:

  • Presence in India: The individual stays in India for a period of 182 days or more during the previous year, or
  • Prescribed Conditions: The individual is in India for 60 days or more during the previous year and 365 days or more during the 4 years immediately preceding the previous year.

If an individual doesn’t meet either of these conditions, they are treated as a Non-Resident for that particular previous year. Certain concessions apply for Indian citizens and persons of Indian origin regarding the prescribed stay duration.

The Finance Act, 2020, introduced amendments stating that the 60-day period can be extended to 120 days if the individual’s Total Income, excluding Income from Foreign Sources, exceeds ₹15 lakh during the previous year. Additionally, an Indian citizen earning Total Income above ₹15 lakh (excluding foreign income) will be deemed a Resident in India if they are not liable to pay tax in any country.

Tax Slabs for Assessment Year 2023-24 

Non-Resident Individuals have the option to choose between the old and new tax regime (under section 115BAC of the income Tax Act). which offers lower tax rates. However, opting for the new tax regimes comes with certain limitations, as certain exemptions and deductions (such as 80C, 80D, 80TTB, and HRA) available in the old tax regime are not applicable.

Income Tax Slab Old Tax Regime Rate New Tax Regime Rate (u/s 115BAC)
Up to ₹2,50,000 Nil Up to ₹2,50,000: Nil
₹2,50,001 – ₹5,00,000 5% above ₹2,50,000 ₹2,50,001 – ₹5,00,000: 5% above ₹2,50,000
₹5,00,001 – ₹7,50,000 ₹12,500 + 20% above ₹5,00,000 ₹5,00,001 – ₹7,50,000: ₹12,500 + 10% above ₹5,00,000
₹7,50,001 – ₹10,00,000 ₹37,500 + 15% above ₹7,50,000 ₹7,50,001 – ₹10,00,000: ₹37,500 + 15% above ₹7,50,000
₹10,00,001 – ₹12,50,000 ₹75,000 + 20% above ₹10,00,000 ₹10,00,001 – ₹12,50,000: ₹75,000 + 20% above ₹10,00,000
₹12,50,001 – ₹15,00,000 ₹1,25,000 + 25% above ₹12,50,000 ₹12,50,001 – ₹15,00,000: ₹1,25,000 + 25% above ₹12,50,000
Above ₹15,00,000 ₹1,87,500 + 30% above ₹15,00,000 Above ₹15,00,000: ₹1,87,500 + 30% above ₹15,00,000

Non-Resident individuals should carefully consider their income and tax-saving options before choosing between the old and new tax regimes, taking into account the applicable exemptions and deductions under each regime.

Income Tax Slabs for Women

In the fiscal year 2023-24, the Indian government introduced a new tax regime with specific slabs for women below 60 years old. The revised tax slabs and rates are as follows:

Tax Slabs Taxation Rate
Up to ₹3,00,000 NIL
₹3,00,001 – ₹6,00,000 5% of the total income exceeding ₹3,00,000
₹6,00,001 – ₹9,00,000 ₹15,000 + 10% of the income exceeding ₹6,00,000
₹9,00,001 – ₹12,00,000 ₹45,000 + 15% of the income exceeding ₹9,00,000
₹12,00,001 – ₹15,00,000 ₹90,000 + 20% of the income exceeding ₹12,00,000
Above ₹15,00,000 ₹1,50,000 + 30% of the income exceeding ₹15,00,000

Additional Surcharge for Women

Additionally, women with an annual taxable income exceeding ₹50 lakh are subject to an additional surcharge, the rates of which are detailed below:

Annual Taxable Income Additional Surcharge Rate
Above ₹50 lakhs to ₹1 crore 10%
Above ₹1 crore to ₹2 crores 15%
Above ₹2 crores to ₹5 crores 25%
Above ₹5 crores 37%

While the government abolished the higher basic tax exemption for women after FY 2012-13, it continued to extend benefits in the form of reduced interest rates on home loans, property tax rebates, stamp duty concessions, and more. The current tax regime and surcharge rates offer a comprehensive perspective for women taxpayers, encouraging informed financial planning.

Filing Income Tax Returns

An ITR filing can simply be described as the process where a taxpayer files a report of the total income earned by him/her in a financial year. An individual can easily complete their return filing on the government’s official portal. There are seven forms that are required: ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7. Before we discuss the forms, let’s quickly see why you should file an ITR.

Importance of Filing the ITR 

Filing income tax returns in India is essential under various circumstances. Here’s a straightforward breakdown of why you need to file ITR:

  • Filing income tax returns is mandatory for individuals falling within taxable income brackets.
  • Companies and firms, irrespective of profit or loss, must file their income tax returns.
  • Taxpayers eligible for a tax refund need to file an ITR to claim it.
  • Individuals needing to carry forward losses under specific income categories must file ITR.
  • Residents with assets or financial interests outside India are obligated to file ITR.
  • Residents acting as signing authorities in foreign accounts are required to file ITR.
  • Individuals earning income from trusts, political parties, educational institutions, etc., must file ITR.
  • ITR is often a requirement when applying for loans or visas.
  • Non-resident Indians (NRIs) earning taxable income from Indian sources must file income tax returns in India.
  • E-filing of ITR is mandatory for those seeking a tax refund.
  • Individuals with gross total annual income exceeding Rs.5 lakh are required to e-file their income tax returns.
  • Specific ITR forms such as ITR 3, 4, 5, 6, and 7 must be filed electronically.

Income Tax Return: Forms You Need 

Submitting the right form is crucial for accurate tax filing. Here’s a simple breakdown of the available ITR forms and who should use them:

ITR Form Name Applicability
ITR-1 (Sahaj) Individuals earning less than Rs.50 lakh annually from salary, pension, and one house property.
ITR-2 Shareholders, Directors of Companies, NRIs, and individuals earning more than Rs.50 lakh from multiple house properties, capital gains, or foreign sources.
ITR-3 Professionals and individuals running a proprietorship in India.
ITR-4 (Sugam) Individuals under the presumptive taxation scheme earning less than Rs.50 lakh from professional income or less than Rs.2 crore from business income.
ITR-5 Associations, LLPs, and partnership firms reporting income and tax computation.
ITR-6 Registered companies in India.
ITR-7 Entities claiming exemptions like universities, research institutions, political parties, and charitable trusts.

Remember, using the correct form ensures a hassle-free tax filing experience. You can download these forms from the official income tax department website here.

Current Surcharge Rates for Different Taxpayers

When an individual’s income surpasses specific thresholds set by the Income Tax Department, a surcharge is added to the income tax amount. Here are the surcharge rates for the fiscal year 2023-24:

Income Range Surcharge Rate (FY 2023-24)
Less than Rs.50 lakhs NIL
Rs.50 lakhs to Rs.1 crore 10%
Rs.1 crore to Rs.2 crore 15%
Rs.2 crore to Rs.5 crore 25%
More than Rs.5 crore 37%

These surcharge rates vary based on the individual’s income, and they are added to the regular income tax as per the specified percentages.

How to Choose Between New Regime or Old Regime?

When it comes to choosing between the old and new tax regimes, the decision depends on the type of income an individual earns. Here’s a breakdown of the considerations for different types of income:

Type of Income When to Choose Regime
Salary Income or TDS-triggering Income Employees can opt for the new tax regime at the start of the financial year. Once chosen, they cannot revert back and can change the option only at the beginning of the new financial year.
Income from Profession and Business The choice between tax regimes is available only once.

Tips for Taxpayers

Before delving into tax-saving strategies, gaining a comprehensive understanding of your tax liability is crucial. As per the current tax slabs, individuals earning a salary of 15 lakhs fall under the 30% tax bracket. Calculating income tax involves considering various factors, including the basic exemption limit, standard deduction, and applicable tax rates for different income slabs.

  1. Optimise Section 80C Deductions
    Section 80C of the Income Tax Act provides a spectrum of deductions up to Rs. 1.5 lakhs. By strategically investing in eligible avenues such as Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), tax-saving fixed deposits, and equity-linked saving schemes (ELSS), individuals can significantly reduce their taxable income.
  2. Deductions under Section 80D
    Section 80D allows individuals to claim deductions on health insurance premiums paid for themselves, family, and parents. Investing in a suitable health insurance policy enables individuals to claim deductions up to Rs. 25,000 for themselves and family members, with an additional Rs. 25,000 for parents (Rs. 50,000 if parents are senior citizens).
  3. Home Loan Interest Deductions
    For those with a home loan, deductions can be claimed on the principal repayment under Section 80C and on the interest paid under Section 24(b). The maximum deduction allowed for home loan interest is Rs. 2 lakhs per year, providing an effective means to reduce taxable income.
  4. Opt for NPS Contributions under Section 80CCD(1B)
    Contributions made towards the National Pension Scheme (NPS) are eligible for an additional deduction of up to Rs. 50,000 under Section 80CCD(1B). Investing in NPS not only provides tax benefits but also aids in building a robust retirement corpus.
  5. Consider Renting a House and Claiming HRA
    Individuals residing in rented accommodations can leverage House Rent Allowance (HRA) to decrease their taxable income. By furnishing rent receipts and necessary documentation, individuals can avail themselves of tax benefits under the HRA component.
  6. Leave Travel Allowance (LTA)
    Leave Travel Allowance (LTA) offers tax exemptions on travel expenses incurred during vacations. Strategic holiday planning, coupled with proper documentation, allows individuals to save taxes through LTA.
  7. Tax-free Allowances and Perquisites
    Exploring tax-free allowances such as medical allowances, telephone reimbursements, and education allowances can aid employees in minimising their taxable income. Additionally, making the most of company-provided perks like accommodation, medical facilities, and food coupons can contribute to reducing tax liabilities.
  8. Voluntary Provident Fund (VPF) Contributions
    Individuals seeking to bolster their retirement savings can opt for voluntary contributions to the Employee Provident Fund (EPF). These additional contributions qualify for tax benefits, offering a means to decrease taxable income.
  9. Plan Capital Gains and Investments Wisely
    For those with capital gains, strategic reinvestment in eligible avenues like the Capital Gains Account Scheme or specified bonds under Section 54EC can lead to tax exemptions. Exploring tax-efficient instruments such as equity mutual funds or tax-saving fixed deposits further aids in optimising tax liabilities.
  10. Consult with a Tax Professional
    Given the intricacies of tax laws, seeking advice from a tax professional or financial advisor is advisable. These professionals can offer personalised guidance based on individual financial situations, ensuring optimal tax-saving strategies, compliance with regulations, and maximisation of tax benefits.
  11. Opt for Tax-saving Fixed Deposits
    Tax-saving fixed deposits (FDs) serve as a popular avenue for tax planning with a lock-in period of five years. Under Section 80C, individuals can claim deductions of up to Rs. 1.5 lakhs from their taxable income by investing in these FDs offered by banks and financial institutions.
  12. Consider Investing in a National Savings Certificate (NSC)
    The National Savings Certificate (NSC), a fixed-income investment scheme by the Government of India, comes with a maturity period of five or ten years. While the interest earned is taxable, it can be reinvested to claim deductions under Section 80C, providing a tax-efficient investment option.
  13. Tax-saving Options under Section 80G
    Section 80G offers deductions for donations made to eligible charitable institutions and funds. Contributions to recognised charitable organisations enable individuals to claim deductions ranging from 50% to 100% of the donated amount, subject to specified limits. It’s crucial to ensure the organisation’s eligibility for tax benefits under Section 80G.
  14. Section 80E for Education Loan Interest
    Section 80E allows individuals to claim deductions on the interest paid on education loans for higher studies. This deduction can be availed for a maximum of eight years or until the interest is fully repaid, providing a means to reduce taxable income while supporting education expenses.
  15.  Tax Benefits through Health Insurance
    Investing in comprehensive health insurance not only offers financial protection but also provides tax benefits. Premiums paid towards health insurance policies for self, family, and parents are eligible for deductions under Section 80D, with a maximum allowance of Rs. 25,000 for individuals and their families (Rs. 50,000 if the insured is a senior citizen).
  16. Other Tax-efficient Investment Avenues
    Investing in tax-efficient instruments, such as equity-oriented mutual funds held for over one year, can optimise tax liabilities. Considering tax implications and choosing instruments with favourable tax treatment enables individuals to reduce their overall tax burden.
  17. Evaluate the Benefits of the New Tax Regime
    The Indian tax system provides options between the old and new tax regimes. Individuals can select based on their financial goals and tax-saving requirements. While the old regime offers various deductions and exemptions, the new regime features lower tax rates but limited deductions. A careful evaluation helps in choosing the regime that offers maximum tax savings.
  18. Plan Investments and Expenses in Advance
    Effective tax planning necessitates careful consideration and advance planning. Reviewing financial goals, income sources, and tax-saving options enables individuals to create a comprehensive tax-saving strategy. Planning investments, expenses, and tax-saving instruments at the beginning of the financial year maximises benefits and avoids last-minute complications.

Common Mistakes to Avoid During Tax Filing

  • Selecting the Incorrect ITR Form: One prevalent mistake is using the wrong ITR form. Choosing the appropriate form depends on your income sources. For instance, ITR Form 1 is suitable for salaried individuals, while ITR Form 2 is for those with both salary and capital gains. Self-employed individuals with business profits should use ITR Form 3.
  • Interest Income Oversight: Failing to report income from all sources, including salary, business, house property, capital gains, and investments, is a critical error. Omitting any income can lead to penalties and scrutiny. Ensure to claim eligible deductions and exemptions to reduce taxable income.
  • Failure to Prevalidate Bank Account: It is crucial to pre-validate your bank account, especially if you expect a tax refund. Without pre-validation, the income tax department cannot credit any owed tax refund to your account.
  • Selecting the Wrong Assessment Year: Confusing the terms “Assessment Year” and “Financial Year” is common. The financial year is when income is earned, while the assessment year is when tax returns are filed. Choose the correct assessment year to avoid filing errors.
  • Forgetting to Verify ITR: Forgetting to verify your income tax return is a common mistake. Verification is crucial to avoid receiving notices from the Income Tax Department. Taxpayers have 30 days to verify their ITR after submission.

It is essential to steer clear of common mistakes such as claiming reliefs without filing mandatory income tax forms, providing incorrect bank details, failing to reconcile income and TDS, ignoring available information, not retaining evidence of claimed deductions, omitting capital gain/loss transactions, and making false claims to reduce taxable income. Always disclose all sources of income to ensure compliance with tax regulations.

In Conclusion

Income tax slab for FY 2023-24 has gone through some significant changes. This guide aims to simplify the complex changes for you in a unified manner. While the new slab offers a more progressive structure that ensures people with lower incomes face minimal tax burden, the higher-income groups have reduced tax liability.

The introduction of tax-free saving investment options definitely allows taxpayers to optimise their financial planning. These revisions not only promote financial inclusivity but also encourage compliance, making it easier for taxpayers to understand their obligations.

FAQs about Income Tax Slabs

The last date to file an Income Tax Return (ITR) for FY 2022-23 (AY 2023-24) without incurring a late fee is 31st July 2023. Taxpayers filing their return after this date will be liable to pay interest under Section 234A and a penalty under Section 234F.

Income tax is calculated as the product of the applicable tax rate and the taxable income. Tax rates vary based on the taxpayer's characteristics and income type.

Tax Deducted at Source (TDS) refers to income tax deducted from specified payments like rent, commission, professional fees, salary, and interest at the time of payment. The recipient of the income is usually responsible for paying the income tax.

Here are some ways to save income tax in 2023:

  • Public Provident Fund
  • National Pension Scheme
  • Premium Paid for Life Insurance policy
  • National Savings Certificate
  • Equity Linked Savings Scheme
  • Home loan's principal amount
  • Fixed deposit for five years
  • Sukanya Samriddhi account

Section 80C of the Income Tax Act allows deductions for various expenditures and investments, reducing taxable income by up to Rs 1.5 lakh annually

Disclaimer: The information provided in this blog is intended for general knowledge purposes only and should not be considered financial advice. We do not take any responsibility for the accuracy or completeness of the information provided. Before making any financial decisions based on the information provided, it is advisable to check the government site and consult with your own financial advisor.

(Visited 110 times, 1 visits today)
Close
tpay-new-blog